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Brazil’s Natura confirms $2bn deal to buy Avon Added in 5/22/2019
 
Natura, the Brazilian cosmetics company that owns The Body Shop, has agreed to acquire Avon Products in an all-stock deal that values the US-listed group at more than $2bn, the companies said late on Wednesday.

The São Paulo-based company will own about 76 per cent of the combined group, while the remainder would be owned by Avon shareholders. 

The acquisition was revealed earlier in the day by the Financial Times. The deal has been in the works for several months and Natura expected it would translate into annual gross revenues of more than $10bn for the combined group thanks to access to more than 200m clients worldwide. 

Avon, which is based in London and listed in New York, has struggled in recent years, and in January cut 2,300 jobs. Its equity value, which has dropped dramatically, was about $1.4bn based on the stock’s closing price on Tuesday. 

The company pioneered the direct-selling model in cosmetics — embodied by its doorstep Avon Lady sellers. But it has lost market share to savvier competitors such as LVMH-owned Sephora, Estée Lauder and L’Oréal as the rise of social media disrupted the cosmetics business.

Millions of teenagers now scout for beauty products on Instagram or YouTube vloggers and then acquire items online or in bricks-and-mortar stores. Natura, which has been eyeing opportunities to expand globally, believes it can revive Avon’s fortunes.

“We have always looked at Avon with respect and admiration,” said Luiz Seabra, Natura’s co-founder and co-chairman. “Natura was founded on its passion for beauty and relationships, and today’s transaction creates a major force in the direct-to-consumer space.”

By buying Avon, Natura will be able to expand internationally, particularly in Asia, Europe and Latin America. Three years ago, Avon decided to spin off its North America business, which was controlled by private equity group Cerberus Capital until recently. The spun-off company took on $230m of Avon’s long-term liabilities, a move that made it easier to sell the company to Natura. 

The South American group acquired The Body Shop in 2017 from L’Oréal in a deal worth €1bn, and has been focusing on boosting the UK retailer’s footprint globally. “This is a slightly different deal from that one, in the sense that it’s of a much larger scale,” said an executive at Natura, which also bought the Australian brand Aesop.

Natura was founded as a small shop in an upscale street of São Paulo in 1969, and is known for its sustainability efforts. It sources a lot of its materials from the Amazon, where it works closely with indigenous people and local farmers.

Source: Financial Times


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